Commercial radio has just fallen close to an historic low in its audience competition with the BBC. This month's Rajar figures give it a share of just 41.3%. At its peak in 1997, that stood at 51.1%, and it seemed then to have the BBC on the run. So what happened to what used to be called independent local radio (ILR)? And why has commercial radio had such a tough time since the turn of the century?

In its persistent lobbying over the past 25 years, the radio industry has been pursuing three aims. First, to be free of its public service obligations, and free from regulation. Second, to be allowed ever more ownership consolidation. And third, to be able to network and to automate programming output.

Successive governments and regulators have steadily conceded ground. Margaret Thatcher's 1990 Broadcasting Act removed commercial radio's public service obligations. Legislation allowed for greater consolidation of ownership. The first significant steps towards networking of FM stations were approved in 1995. Automation began to be common from 2000.

Today, commercial radio has largely got what it has lobbied for although, citing internet and BBC competition, the industry is arguing for still more deregulation. Two conglomerates own the plurality of radio stations - Global and Bauer. Much of the output is common across groups. Networking and automation are the norms. Since 2000, localness has been in headlong retreat. Just this month, Ofcom has permitted the remaining local programmes to be originated from studios outside the broadcast area, and regional stations to ditch local output entirely in favour of quasi networks. Digital switchover is being pressed improbably early, to help rescue the commercial companies. The old government facilitated all this; and historically those in the new one have applauded it. The Tories backed the early switch-off for digital radio, and they have consistently supported ownership liberalisation.

Yet at its inception, the UK was not destined to have commercial radio. Once the offshore pirate radio stations had been scuppered in 1967, Edward Heath's Conservative government legislated in 1972 for something very different. ILR was intended to be public service radio, funded by advertising, and tightly regulated. Each company was independent, and owned by local people, with stations broadcast entirely from local studios. Independent Radio News apart, networking was unknown and syndication rare.

Those standalone companies had a prominent presence in their areas, with local premises and studios, boards and managing directors. There were substantial local newsrooms. Each station produced a varied output and staged concerts and ran local action-lines.

All that has now changed, as independent radio in the UK has morphed into commercial radio. Yet commercial radio, which is now largely indifferent to its historic legacy, has been steadily losing ground, and not just in audience share. Advertising and sponsorship annual revenue had risen throughout the 1990s to reach £594m in 2000. By the end of last year it was back down to £506m. If you were to adjust for inflation, and all the additional new digital and analogue stations in the past 10 years, that comparison would be even more stark. As commercial radio has moved further away from its independent public service roots, so it has struggled to find a workable business model.

Looked at from the perspective of four decades, that is not surprising. Local public service was independent radio's USP. Genuine localness that is, not just automated weather, traffic and what's ons, and regionally-gathered news, all coming from remote studios. ILR succeeded by being local, not just seeming local. Relaxing the regulation which ensured that, may have damaged rather than saved the medium.

The apparent paradox that it was under heavier regulation that non-BBC did best in audience terms and even comparatively in attracting revenue. Commercial radio nowadays has all but abandoned genuine localness – leaving that field to the new phenomenon of community radio – but it has still to demonstrate a convincing new distinctiveness. History suggests that, until it does, its struggles may continue.

Sounds of Your Life is published by John Libbey Publishing at £22.50; www.johnlibbey.com